Advertising: The Revolution Won't Be Through Friend Requests

Overhype

from the skip-this-step dept

Yesterday Facebook announced its long-awaited advertising program. This was inevitable: if you're going to justify a valuation just shy of Iceland's GDP, you've got to eventually propose a means of generating revenue. Facebook will no doubt earn quite a bit of money at the ad game. But the initiatives disclosed yesterday are likely to be a mixed bag — and not at all as innovative as founder Mark Zuckerberg would have you to believe. The most straightforward of the new offerings is Facebook's contextual advertising system. Drawing on the vast amounts of data provided by its users and supplying metrics and query capabilities will no doubt prove to be lucrative. Much has been made of Facebook's particularly rich user data — perhaps too much. Although that data is likely to be better structured and therefore easier to leverage, it's not obvious that Facebook will be able to target ads to its users more precisely than, say, Google does within Gmail. Still, it's hard to imagine these ads being anything less than a huge financial success.

The same can't be said for Facebook Pages, which will provide brands with profiles on Facebook. Facebook has already tried this approach with Wal-Mart, and the results were disastrous. Not only did the nominally back-to-school-oriented page fill up with complaints about the retailer's business practices, but — perhaps more tellingly — many users attacked Wal-Mart and Facebook for bringing corporate shilling to their beloved social network. MySpace's brand profiles have met with a similarly lackluster response: An Inconvenient Truth's MySpace page was something of a marketing coup, but once the novelty wore off the practice failed to produce anything of significance. Although other companies will attract less ire than Wal-Mart, it's hard to imagine users being any more keen to engage with them (except, perhaps, for already-elite brands like Apple or Nike).

The final and most interesting prong of Facebook's strategy is Beacon, a system that will allow partner sites to post users' actions back to Facebook. Having your Amazon purchases or Netflix selections displayed in your mini-feed are the sorts of applications that are being hyped. As you might imagine, Beacon carries privacy concerns, as well as worries that the move will result in a further dilution of Facebook's already annoyingly low signal:noise ratio.

But to my mind the biggest unknown is whether the new data will be considered meaningful by consumers. There's no question that endorsement of a product by a peer is the most effective form of advertising available. Beacon is built with the hope that there are many marginal cases in which users would be willing to recommend the products they're consuming, but can't be bothered to take deliberate action to do so. But does purchasing a product necessarily mean a user wants to endorse it? Or do consumers prefer to curate their public purchases, picking and choosing the brands that they want to use to define their online identity?

It's not clear what the answer is, but I think there's reason to be skeptical of any initiative that attempts to automate individual peer recommendation. After all, genuine human enthusiasm is the sole reason why such recommendations are so effective.

Filed Under: advertising, brands, endorsements, privacy, social networks
Companies: facebook